It should come as no surprise to merchants that digital technology is making transformative impacts on their sector. One of the more significant impacts is of course in payments, and the experience of paying for what you bought has been evolving rapidly from a traditional world of cash, physical cards, and cheques to a new world of instant transfers and digital wallets housed on mobile devices. Let’s take a look at the second of these, because it has implications that go beyond convenience at the checkout.
A digital wallet is, simply, a secure electronic version of a physical wallet. A consumer “loads” their debit, credit, and/or loyalty cards into a digital wallet app on their smart phone, and to purchase something they simply need to choose a card, hold their phone over a merchant’s NFC-enabled POS terminal, and if prompted, quickly authenticate the payment using a thumbprint, a PIN or pattern, or even just their face.
Naturally, this is far easier and quicker than pulling a card out of a physical wallet, inserting it, and choosing an account and entering a PIN on a heavily-used POS keypad. For a customer it’s more convenient, and for a merchant that convenience translates both into a happier customer and into more customers served per hour – something that retailers with peak hours (like coffee shops, for example) benefit enormously from.
It’s very secure too. Through “tokenization”, the customer’s personal account numbers are never transmitted to, or stored by, the merchant – and thus are not vulnerable to being intercepted or stolen by hackers. Instead, a virtual account number is used for the transaction and accepted by the merchant, to be translated back into a real account number only far behind the scenes by the token service provider itself.
But it’s not just about the POS terminal; digital wallets show up in other roles too. The emergence of “in-app” payment technology, for example, removes friction from the purchase process by seamlessly connecting a mobile device’s digital wallet to an app on that same device. This means that a consumer can open an app for a quick-service restaurant located near her office building, order lunch, pay for it instantly via her digital wallet without leaving the app – no need to laboriously enter a payment card number and details – and then head downstairs to the foodcourt to pick up her food without having to wait in line. The customers-per-hour benefit and convenience of digital wallets thus gets even greater when in-app payments are taken into account.
In fact, the ability of digital wallets to separate the act of paying from the physical presence of a checkout counter and POS terminal has almost revolutionary potential for changing how stores work. While a merchant without a website or an app will certainly still benefit from improved customer experience and greater throughput by accepting digital wallets, a merchant with a website or an app may find themselves able to integrate physical shopping into a complete “omnichannel” experience. A customer may browse items on their mobile device, pay for them via digital wallet, and walk into a store to pick them up – or they may shop in the store, paying for items as they select them, and then simply walk out of the store when finished. The layout of a typical retail store in 2025 may be far different as a result.
Merchants will find it worthwhile thinking about what digital wallets can mean to them. Not only are digital wallets faster and more secure than their physical wallets, but once integrated into the comprehensive digital infrastructure of apps and e-commerce, they’ll soon change many aspects of how customers interact with their favourite merchants– including bringing new, richer experiences that they will come to expect from them.